GBP/AUD: UK PM Spokesman Comments Spook Markets

The British pound is lower against the Australian dollar on Monday afternoon as new stimulus measures in China helped demand for Asia-Pacific currencies while renewed trade uncertainties for the United Kingdom hit Sterling.

GBP/AUD was down by 69 pips (-0.35%) to 1.9364 with a daily price range of 1.934 to 1.943 as of 3pm GMT. The currency pair dipped as low as 1.935 before rebounding but remains well off highs of the day.

AUD pushed higher by the new economic stimulus measures in China

The announcement of new economic stimulus measures in China pushed the Chinese renminbi as well as other Asia Pacific currencies like the Aussie higher on Monday. Australia has strong economic ties to Australia and so its currency responds positively to good news about the Chinese economy. Officials in the Australian government as well at the Reserve Bank of Australia have been intimating that exposure of Australia’s economy to the coronavirus is potentially very big so any signs that China can turn things around is well-received by currency traders.

Among the measures announced on Monday, the PBOC said it would cut medium term interest rates by 10 basis points, lowering the rate on almost $29B in Chinese bank loans. This is on top of previous efforts directed at Hubei province, where most of the cases of the virus have been detected.

The pound

In what is partly a technical correction from big gains last week, the British pound is pulling back from comments made by a spokesman for Boris Johnson about the forthcoming UK-EU trade talks. The spokesman said that the UK is “not seeking anything special” from the EU on trade. Whereas markets were rather hoping the EU would tolerate a very bespoke deal that continues frictionless trade wherever possible.

The Boris Johnson government appears to be trying to push the idea that it would be happy with an arrangement only slightly better than having no formal deal with the EU in order to create a better negotiating potion. Additionally, some investors are still weighing up the pros and cons of last week’s surprise news that the UK will have a new Chancellor.

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